Trial balance: how to prepare it and find the errors

A trial balance lists every account in the general ledger with its debit or credit balance on a given date. Because every journal entry has equal debits and credits, the two columns must have the same total. A trial balance that balances proves the arithmetic of double entry, not that the books are right; it is the starting point for the financial statements.

How to prepare a trial balance

1. Make sure every transaction for the period is posted: invoices, receipts, payments, payroll, depreciation.
2. Take the closing balance of every account in the general ledger on the chosen date.
3. Put debit balances (assets, expenses) in the debit column and credit balances (liabilities, equity, revenue) in the credit column.
4. Total both columns. If they differ, find the difference before going further.
5. Post the period-end adjustments (accruals, prepayments, depreciation, closing stock) and prepare the adjusted trial balance.

When the trial balance does not balance

In a manual or spreadsheet system, a difference usually comes from a one-sided posting, a balance copied to the wrong column, or a transposed number. A useful check: if the difference divides exactly by 9, look for two swapped digits (for example 540 entered as 450); if it divides by 2, look for an amount posted on the wrong side.

Errors a balanced trial balance does not reveal

These are found by reviewing account ledgers, reconciling bank and customer accounts, and comparing balances with the previous period, not by the trial balance itself.

• Omission: a transaction never recorded at all.
• Wrong account of the same type: rent posted to salaries.
• Error of principle: buying a machine posted as an expense instead of a fixed asset.
• Compensating errors: two mistakes of equal amount on opposite sides.
• Reversed entry: debit and credit swapped on both sides.